michael guichon sohn conference presentation - fiat chrysler automobiles

IM: F

NYSE: Expected October 2014

Michael Guichon, Columbia Business School

Share Price (as of 5/2/14) 8.71

Shares outstanding (mm) 1,251

Equity Market Cap (mm) 10,894

Add: Debt (mm) 29,306

Less: Cash (mm) 19,439

Total Enterprise Value 20,761

Add: Underfunded Pension 6,000

Adjusted Total Enterprise Value 26,761

52 Week Range 3.91 8.85

Dividend Yield 0.0%

Average Daily Volume (mm) 12.2

2014E 2015E 2016E

EV/EBITDA 3.08x 2.79x 2.46x

P/E 13.15x 8.08x 6.25x

P/CPS 1.75x 1.53x 1.42x

Note: Consensus as of 5/2/14

Current Capitalization

Trading Statistics

Summary Valuation

Investment Thesis

Market significantly underestimating transformative nature of Chrysler consolidation and the value of the companys business units. Chrysler alone is conservatively worth 16.5bn and Ferrari/Maserati are worth 6.9bn (~90% of current EV), minimizing downside

Chrysler acquisition improves the firm by reducing management distraction, leveraging future production and R&D synergies and FCAs improved credit profile

FCAs value is misunderstood due to a cumbersome capital structure, several obscured assets and economic weakness in key markets

FCA has great brands managed by excellent capital allocators and they are taking share in key markets

FCA trades at 4.0x normalized earnings

Fair Value: 16.50 (8.0x base normalized EPS of 2.05)

2

Recommend investors buy Fiat shares with a target share price of 16.50; over 90% upside

China, 55.2%

Japan, 9.8%

Australia, 22.7%

Other, 12.3%

US, 84.1%

Canada, 12.1% Mexico, 3.8%

Brazil, 82.6%

Argentina, 11.7% Other, 5.7%

Company Overview

FCA is the 6th largest automobile manufacturer globally1

CEO Sergio Marchionne hired in 2004 by founding Agnelli family (31% owners) and encouraged to sell the Fiat Auto subsidiary Finding no buyers interested in a low margin, Italian focused car company, he began growing the business with the goal of expanding Fiats presence

globally

Fiat acquired 20% of Chrysler after its 2009 bankruptcy. On January 21, 2014 it acquired 100% ownership

Fiat and Chrysler have been run by CEO Sergio Marchionne since 2004 and 2009 respectively

3

Source: Fiat 2013 Annual Report

FCA

North America

% of Sales: 53% % of EBIT: 77%

Europe

% of Sales: 19% % of EBIT: -25%

LatAm


Asia-Pac


Ferrari/Maserati


Components and Other


Geographical Breakdown of Segment Unit Volumes: Breakdown by

Type:

Italy, 48.0%

France, 9.9%

Germany, 11.4%

U.K., 9.9%

Rest of Europe, 20.8%

Magneti Mareli - Auto Parts, 74.1%

Teksid - Metal Casting, 8.5%

Comau - Automation

Systems, 18.1%

North America,

40.5%

Europe, 23.2%

China, 18.9%

Other, 17.4%

1By revenues

How the Chrysler deal is transformational

The Chrysler purchase was a very value accretive deal; Fiat paid $4.4bn in cash for a business that generated $3.1bn in EBIT in 2013

The addition of Chrysler changed Fiat from a regional car manufacturer into the 6th largest in the world

1. Operational synergies a larger manufacturing base with a more diverse group of product cycles will allow the combined company to achieve higher average levels of capacity utilization and increase sales in formerly underserved areas around the world

2. The use of common components and vehicle platforms between Fiat and Chrysler will reduce design and manufacturing costs

3. Increased scale allows FCA to generate high ROI from investments in R&D, i.e. R&D synergies with Ferrari and Maserati

4 Marchionne inherited a loss making Italian car/tractor/parts maker in 2004 and created a global automotive giant

Key Drivers of Normalized Earnings

Normalized Earnings Potential

2.05 with Europe at Breakeven (base case, expected in 2016)

2.55 long term with modest European recovery

Normalized earnings yield of 24%-30%

Continued strong performance/market share gains of Chrysler in North America

Return to high single digit/low double digit margins in LATAM

Cash balance reduced by 10bn to delever. Average weighted cost of debt falls 120bps to 5.3%

6 A return to normal earnings driven by Italian/Brazilian recoveries, Chrysler performance and capital structure rationalization

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Capital Structure

2013A Normalized Change

Debt 29,875 20,039 (9,836)

Cash 19,439 10,000 (9,439)

Net Debt 10,436 10,039 (397)

Interest Expense (1,995) (1,062) 933

Interest Income 97 100 3

Cost of Debt 6.7% 5.3% -1.4%

Income Interest Rate 0.5% 1.0% 0.5%

Net Interest Margin -6.2% -4.3% 1.9%

Net Debt Expense (1,898) (962) 936

ETR 40.0% 40.0% 40.0%

Net Income Impact (1,139) (577) 562

EPS Impact (0.91) (0.46) 0.45

Capital Structure Optimization

Capital Structure

Previously, complicated ownership structure and debt covenants prevented Fiat from accessing Chryslers liquidity and led to an excessive cash balance at Chrysler and a highly inefficient overall capital structure

With full ownership of Chrysler, cash will start to be more fungible between Fiat and Chrysler, FCA can begin to reduce its gross debt burden

The simplified company has a much better credit profile and this has been reflected in an improvement in credit default swap levels

FCAs cost of 7 year debt is currently 4.3% in EUR

FCA is rated BB-/B1/BB- (S&P, Moodys, Fitch)

Debt/EBITDA = 3.9x, interest coverage = 1.5x

In 2017, Debt/EBITDA = 2.4x, interest coverage = 3.4x

Future credit rating upgrades are likely

8 Rationalizing the companys capital structure will increase pre-tax earnings significantly

North America

Chrysler/North America (Value: 16.6bn)

Given Chryslers 2013 EBITDA of approximately 4.4bn, FCAs EV is trading at 5.8x Chryslers LTM EBITDA

Chrysler has maintained steady margins in recent years while growing revenue in the US and Canada by taking market share

Since Marchionne took control, North American market share grew from 9.2% in 2009 to 11.5% in 2013, which is still below 2007 pre-crisis level of 12.6%

Chryslers previous underperformance can largely be attributable to management, which is no longer a concern given Marchionnes strong track record

1US, Canada and Mexico respectively represent 83%, 12% and 5% of North American Chrysler vehicles sold

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QoQ Chrysler Group Performance

Qtly Revenue (mm USD) EBITDA Margin EBIT Margin

Chrysler has steadily improved operations in North America versus Ford and GM

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2007 2008 2009 2010 2011 2012 2013

Chrysler Market Share1

US Canada Mexico Total North America

Marchionne Takes Control

10

Chrysler/North America (Value: 16.6bn)

Were Chrysler to trade in the market on a standalone basis at peer multiples, it would be valued significantly higher than 16.6bn

From 2010 to 2013, Chrysler grew EBITDA at a 21.0% CAGR versus -5% for Ford and -1% for GM

Ford and GMs TEV/EBITDA LTM are 11.5x and 4.8x respectively

Given EV/EBIT and EV/EBITDA multiples for Ford and GM, Chrysler would be worth between 24.0bn and 37.1bn, or 90% to 138% of FCAs current EV with net pension obligations

yet still trades at a discounted valuation

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Chrysler GM Ford

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How you improve a brand

2007 Jeep Grand Cherokee V8

Base price: $34,690

13 mpg city, 20 mpg highway

0-60 in 9 seconds

12

2014 Jeep Grand Cherokee V8

Base price: $36,790

18 mpg city, 26 mpg highway

0-60 in 7 seconds

Chryslers reorganization strategy is focused on improving its products and relying on existing brands to drive consumer demand and take market share

FCAs global reach will help Chrysler sell into new markets and increase penetration in emerging markets

Producing Chrysler brands for European markets in Italy will reduce idle capacity and have a meaningful impact on profitability

Chrysler does not need to completely reinvent itself in order to succeed

Valuation of North America

Chrysler has steadily gained market share and maintained consistent margins since Marchionne took over in 2009

Jeep is the #1 SUV brand in the US; Ram trucks sales have experience double digit growth rates since 2009

New Jeep and Ram models will help Chrysler continue top line growth

13

Segment Financials 2013A 2017E Normalized Low High

Revenue 45,777 54,690 55,000 50,000 60,000

EBIT Margin 5.0% 5.8% 5.8% 5.0% 6.5%

EBIT 2,290 3,149 3,190 2,500 3,900

EBITDA 3,820 4,985 5,026 4,336 5,736

NOPAT 1,489 2,047 2,074 1,625 2,535

ETR 35.0%

Net Income 968 1,330 1,348 1,056 1,648

EPS 0.77 1.06 1.08 0.84 1.32

Fair Value Base Bear Bull

EBIT Multiple 5.20x 4.23x 6.50x

EBITDA Multiple 3.30x 2.44x 4.42x

NOPAT Multiple 8.00x 6.50x 10.00x

EV of Segment 16,588 10,563 25,350

As % of Current Adjusted EV 62.2% 39.6% 95.0%

Value Per Share 13.26 8.44 20.27

NAFTA

International

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2003 2005 2007 2009 2011 2013 2015 2017

Revenue/Assets (lhs)Revenue/Assets Forecast (lhs)EBIT Margin (rhs)

Fiat - Focus on Capacity Utilization

A recovery in European automotive demand, particularly in Italy, will naturally increase Fiats capacity utilization and lead to margin expansion

Increasing demand of higher margin luxury brands in Italy will improve profitability significantly

Plans to shut high cost production facilities in Italy will remove the only assets that are losing money on an operating basis

The forecast shown incorporates a further 12% drop in Brazilian sales, after a 10% drop in 2013 from 2012, and a significant decrease in EBIT margin

15

Marchionne becomes CEO

In this high fixed cost business, utilization = profitability

Europe

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Italian New Car Sales (in thousands, YTD)

Net Mortgage Lending (YoY % Change)

Fiat Europe (Value: 4.2bn) Italian Recovery

Automotive demand has fallen more in Italy than in peer countries that avoided severe dislocation in local credit markets

Fiats Italian sales were worth 7bn in 2013 (29% market share), making it the most exposed to the European PIIGS among large auto manufacturers

Reduced banking solvency concerns will lead to a recovery in automotive financing

Fiat is very well placed to benefit from the recovery in Italian demand for durable goods

A recovery to 2.2mn sales per year would imply a 5bn increase in Fiats revenue if market share remains roughly constant

17 A return to normalcy in Italian credit markets will drive a recovery in automotive demand

How to relaunch Alfa Romeo

18 A timeless brand and key technology from Ferrari/Maserati gives Marchionne the wherewithal to turn around Alfa Romeo

Increasing volumes of higher margin luxury brands by employing idle capacity in Italian plants will have a meaningful impact on profitability

Goal of tripling production to 300,000 units/year would add nearly 1bn of EBIT

2007 Alfa Romeo GT Q2

Base price: $42,400

0-60 in 8.2 seconds

2014 Alfa Romeo 4C

Base price: $55,000

0-60 in 4.2 seconds

Valuation of Europe

Improved capacity utilization and gradual rollbacks of sales incentives should lead a return to profitability

Operational synergies with Chrysler will improve overall efficiency and allow for higher normalized EBIT margins in the future

19

Prior Peak

Segment Financials 2007A 2013A 2017E Normalized Low High

Revenue 26,812 17,420 24,911 23,000 21,000 27,000

EBIT Margin 3.0% -4.2% 3.7% 3.3% 2.5% 4.0%

EBIT 803 (737) 910 748 525 1,080

EBITDA 180 2,414 2,251 2,029 2,584

NOPAT 562 (516) 637 523 368 756

ETR 30.0%

Net Income 393 (361) 446 366 257 529

EPS 31.5% (0.29) 0.36 0.29 0.21 0.42





EV of Segment 4,186 2,389 7,560



Europe

Latin America

Latin America/Brazil (Value: 5.5bn)

Fiat is the largest auto manufacturer in Brazil and had the highest reported profit in the region in 2013

In Brazil, low interest rates led to unsustainable growth in consumer and business lending

The coming recession will likely involve sharp increases in non-performing loans and a significant reduction in the availability of credit

Long-term fundamentals of Brazilian automotive demand (growing population and gradually increasing living standards) remain positive

21 Fiat has a dominant position in Brazil where long term fundamentals remain positive

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Government Debt/GDP

Private Debt/GDP

Total Debt/GDP

Valuation of Latin America

Fiats Brazilian business has a history of being fast growing and consistently profitable with high returns on capital, and it deserves a higher multiple

Fiat has 22% market share in Brazil and a large domestic manufacturing base a necessity in a country with high local content requirements

22 While 2011 EBIT margins may not be sustainable, the Brazilian business is very profitable and total market demand will grow

Prior Peak


Revenue 11,068 9,973 12,125 12,000 11,000 14,000

EBIT Margin 12.5% 4.9% 8.6% 8.5% 7.5% 11.0%

EBIT 1,385 492 1,040 1,020 825 1,540

EBITDA 1,890 1,136 1,673 1,654 1,459 2,174

NOPAT 928 330 696 683 553 1,032

ETR 33.0%

Net Income 622 221 467 458 370 691

EPS 0.50 0.18 0.37 0.37 0.30 0.55





EV of Segment 5,467 3,593 10,318



Latin America

Luxury & Performance Brands

A unique, obscured asset with the best operating and financial performance in the industry

Luxury Brands Ferrari & Maserati (Value: 6.9bn)

Stable, high margin business with real pricing power

Very attractive R&D synergies found using 2-3 year old Ferrari technology in Maserati cars

Uncertain if Fiat willing to monetize but given margin, growth and pricing power Ferrari is a 4bn - 7bn asset (3.50- 5.50/sh) 1,2

Agnelli family has been supportive of value maximizing spinoffs (Fiat Industrial spun off to shareholders in late 2010)

Using the valuation of Ferrari peer Aston Martins sale of 37.5% of the company to Investindustrial in 2013 would value Ferrari alone at 7bn 3

Successful relaunching of Maserati in 2002 gives confidence in Fiats ability to reestablish the Alfa Romeo brand outside of Europe

24

1Net to Fiats 90% ownership of Ferrari. 2No true public comparable companies exist. Toyota and BMW have the highest margins of public automakers (9.5-10.5%) and trade at 9.0-9.5x EBIT Multiples 3http://www.bloomberg.com/news/2012-12-07/investindustrial-to-purchase-37-5-stake-in-aston-martin.html

Luxury Brands Ferrari & Maserati (Value: 6.9bn)

EBIT to grow from 535mm in 2013 to 923mm in 2015 as Maserati production increases from 15,400 units/year 50,000 units/year (all capacity is online and Maserati gross margins now higher than Ferrari)

Pricing power:

12% and growing EBIT margin business (vs. 3.5% for FCA)

Two year waiting list for Ferrari (intentionally limiting sales to 7,000 units/year)

22,500 orders outstanding for Maserati1

Maserati currently participates in only 22% of luxury market segments

Launch of Luxury SUV and E segment high end sedan in 2015 provides exposure to 100% of 1 million unit/year market

25

1October 15, 2013 Fiat Group Luxury and Finance Borsa Italiana, Milan

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After relaunching in the US in 2002, Maserati has now primed the market for even more rapid, profitable growth

Valuation of Luxury Brands - Ferrari

Business deserves premium multiple given brand is one of the few with real pricing power

Margins are highly resilient

Ferrari intentionally supplying below actual demand, models assumes no growth in units

26

Prior Peak


Revenue 1,921 2,300 2,569 2,575 2,200 3,000

EBIT Margin 17.6% 15.8% 16.0% 16.0% 15.0% 18.0%

EBIT 339 364 412 413 330 540

EBITDA 497 406 710 711 628 838

NOPAT 220 237 268 268 215 351

ETR 35.0%

Net Income 143 154 174 174 139 228

EPS 0.11 0.12 0.14 0.14 0.11 0.18





EV of Segment1 3,839 2,827 5,281



Ferrari

1Net to Fiats 90% ownership

Conservative multiples relative to peers yields significant value

Valuation of Luxury Brands - Maserati

Maserati was relaunched in the US in 2002, and after absorbing several years of start up costs now exhibits similar gross margins as Ferrari

Capacity has been expanded to support 50,000 units/year in 2015 from 15,400 last year

Significantly higher room for growth in this segment of the market

27

Annualized

Segment Financials 4Q13 2013A 2015E Normalized Low High

Revenue 3,104 1,659 4,911 5,000 4,000 5,750

EBIT Margin 7.5% 6.4% 10.0% 10.0% 7.5% 15.0%

EBIT 232 106 491 500 300 863

EBITDA 424 298 683 692 492 1,054

NOPAT 151 69 319 325 195 561

ETR 35.0%

Net Income 98 45 208 211 127 364

EPS 0.08 0.04 0.17 0.17 0.10 0.29





EV of Segment 3,113 1,476 5,272



Maserati

A highly profitable, high growth business

Valuation of Asian Business

Despite being late to Asia, the Jeep products have been hugely successful in recent years and consumer demand remains very strong

Shipments increased 58% year over year to 163,000 in 2013

FCA has sales points in 126 Chinese cities and there are nearly 500 cities with populations over 500,000

29

Prior Peak


Revenue 2,086 4,621 5,670 5,600 5,000 8,000

EBIT Margin 6.2% 6.9% 7.9% 7.5% 6.75% 8.0%

EBIT 129 319 448 420 338 640

EBITDA 224 617 790 762 680 982

NOPAT 97 239 336 315 253 480

ETR 25.0%

Net Income 73 179 252 236 190 360

EPS 0.06 0.14 0.20 0.19 0.15 0.29





EV of Segment 2,520 1,645 4,800



Asia-Pacific

Current penetration only focused on 1st tier cities, future growth to be driven by build out in 2nd and 3rd tier cities

Management Track Record

Management & Track Record

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Fiat under Marchionne has a great track record of creating value for shareholders

Some market participants point to missed goals from the 2010 5-year plan as a sign that management is unreliable, but this is unfair because the Euro crisis could not have been predicted by management a year in advance

Marchionnes incentives are fully aligned with shareholders as he has vested options on 5mn shares with a strike price of 13.37 in addition to 10.7mn shares with a strike of 6.583

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Under Marchionnes stewardship, FCA has generated best in class financial performance

Valuation

Fair Value

TEV Per Share TEV Per Share TEV Per Share

Chrysler 16,588 13.26 10,563 8.44 25,350 20.27

Fiat-Europe 4,186 3.35 2,389 1.91 7,560 6.04

Fiat-Brazil 5,467 4.37 3,593 2.87 10,318 8.25

Asia-Pac 2,520 2.01 1,645 1.32 4,800 3.84

Luxury Brands1 6,952 5.56 4,303 3.44 10,553 8.44

Parts 1,000 0.80 - - 2,000 1.60

Total 36,714 29.35 22,492 17.98 60,581 48.43

TEV Per Share TEV Per Share TEV Per Share

Less: Debt (29,306) (23.43) (29,306) (23.43) (29,306) (23.43)

Add: Cash 19,439 15.54 19,439 15.54 19,439 15.54

Total Equity Value 26,847 21.46 12,625 10.09 50,714 40.55

Less: Underfunded Pension (6,000) (4.80) (6,000) (4.80) (6,000) (4.80)

Adjusted Total

Equity Value

% Upside 91.4% 91.4% -39.2% -39.2% 310.4% 310.4%

Sum of the Parts

35.75

Base Bear Bull

2013A

44,714 5.30 6,625 16.67 20,847

Sum-of-the-Parts

33

Recommend investors buy Fiat shares with a target share price of 16.50; over 90% upside

Market significantly underestimating transformative nature of Chrysler consolidation. Chrysler alone is conservatively worth 16.5bn and Ferrari/Maserati are worth 6.9bn, which minimizes downside

Chrysler acquisition improves the firm by reducing management distraction, leveraging future production and R&D synergies and FCAs improved credit profile

FCAs value is misunderstood due to a complicated capital structure and several obscured assets

FCA has great brands managed by excellent capital allocators and they are taking share in key markets

FCA trades at sub 4.0x normalized earnings

Fair Value: 16.50 (8.0x base normalized EPS of 2.05) 1Net to Fiats 90% ownership of Ferrari

Special Thanks To

Thomas Schweitzer

Sam White

[email protected]

[email protected]

34

Appendix

Ticker Name CUR EV '14 P/E '15 P/E '16 P/E

'14 EV /

EBIT

'15 EV /

EBIT

'16 EV /

EBIT

'14 EV /

EBITDA

'15 EV /

EBITDA

'16 EV /

EBITDA

Gross

Margin

EBIT

Margin

NI

Margin

VOW GR VOLKSWAGEN AG 165,980 8.31 7.39 6.80 13.05 11.30 10.34 6.59 6.10 5.66 18.1% 6.3% 4.6%

7203 JT TOYOTA MOTOR CORP 219,355 9.42 8.80 7.97 12.63 11.37 10.39 9.28 8.44 7.80 18.8% 9.4% 4.4%

DAI GR DAIMLER AG 143,601 11.81 10.06 9.19 14.88 12.87 11.80 9.81 8.74 8.03 21.6% 6.7% 5.8%

GM GENERAL MOTORS CO 38,617 9.20 6.95 6.17 6.64 5.15 4.90 3.82 3.18 2.95 13.2% 3.6% 3.4%

F FORD MOTOR CO 44,495 11.80 8.51 8.01 9.44 6.24 4.58 5.93 4.60 4.48 12.8% 3.7% 4.9%

BMW GR BAYERISCHE MOTOREN WERK 114,009 10.53 10.02 9.67 13.64 13.19 12.84 9.38 9.06 7.94 20.1% 10.4% 7.0%

7201 JT NISSAN MOTOR CO LTD 60,110 10.59 8.95 7.69 16.43 13.10 11.33 9.28 8.10 7.38 16.9% 4.7% 3.6%

UG FP PEUGEOT SA 28,342 11.22 8.37 64.63 24.33 18.50 10.08 7.81 6.63 15.0% -0.3% -4.3%

RNO FP RENAULT SA 43,632 9.29 7.10 6.14 31.48 22.39 18.09 9.80 8.54 7.88 17.9% 3.0% 1.4%

F IM FIAT SPA 31,138 13.15 8.08 6.25 8.61 7.34 6.49 3.59 3.26 2.87 14.1% 3.9% 1.0%

Mean Peer Group (EX FIAT): 10.12 8.78 7.78 20.31 13.33 11.42 8.22 7.17 6.53 17.2% 5.3% 3.4%

FIAT Valuation Differential vs. peer group: 29.9% -7.9% -19.6% -57.6% -45.0% -43.2% -56.3% -54.6% -56.1% -17.8% -26.0% -69.6%

Fiat Ex Luxury Brands 24,186 7.72 4.04 2.87 8.47 7.24 6.21 3.15 2.96 2.56 14.1% 3.0% 1.0%

Mean Peer Group (EX FIAT): 10.12 8.78 7.78 20.31 13.33 11.42 8.22 7.17 6.53 17.2% 5.3% 3.4%

FIAT Valuation Differential vs. peer group: -23.7% -54.0% -63.1% -58.3% -45.7% -45.7% -61.6% -58.7% -60.9% -17.8% -42.8% -71.4%

Relative Valuation

36

Source: Bloomberg as of 5/2/2014. Luxury Brands valued at 6.952bn

Across most metrics, Fiat trades at a sizeable discount to peers

Bear Case

Despite success of Chrysler, FCA remains free cash flow negative and the company needs a recovery in Europe to return to positive cash flow

FCA is operating in a cyclical and capital intensive industry and the company carries substantial leverage

Obstructive European labor laws will prevent FCA from rationalizing production and achieving high levels of capacity utilization

Credit overhang and rising non-performing loans could lead to a funding stop in Brazil

High expectations for Jeep and Maserati leave room to disappoint

37

Risks and Mitigants

Continued troubles in the global economy, particularly Italy and Brazil, could hurt automobile sales Consumers will eventually need to purchase new cars as maintaining older ones becomes prohibitively expensive

Large ownership by Agnelli family approximately 31% of the company. If they look to exit their position, problems could arise

John Elkann, who is Gianni Agnellis grandson, is Chairman of the company. The family has mostly been passive, but is looking to maintain its large stake. Elkann has demonstrated considerable faith in Marchionnes abilities

Marchionne has said he will stay through 2016, but it is uncertain what will happen if he decides to leave then. He said it is highly likely that his successor will be an internal candidate

Marchionnes options give him substantial incentives to stay and improve shareholder value

There are large pension liabilities, with approximately 6bn in unfunded employee benefits and other provisions

The trend here is positive as unfunded amount decreased from 8bn in 2012 to 6bn in 2013

Should the company issue convertible debt, there could be potential dilution in share value Unsubstantiated rumor, no real need for additional equity in the business

38

Chrysler Acquisition

Fiat acquired Chrysler through a series of transactions between June 2009 and January 2014 for a total cash outlay of approximately $4.4bn

The initial transaction was a Section 363 bankruptcy sale for 20% of Chrysler, which occurred after it declared Chapter 11 bankruptcy

Creditors appealed the sale, but were eventually overruled to preserve going concern value and prevent liquidation

Fiat increased its ownership by meeting performance targets and shrewd negotiating with the US Treasury, Canadian Government and VEBA Trust

Fiat purchased the remaining 41.5% from VEBA trust for $4.35bn in January 2014, which included $1.75bn in cash from Fiat, $1.9bn from Chrysler and an additional $700mn in contributions over the next four years

Fiats cash outlay of approximately $4.4bn compares with $7.4bn that Cerberus paid for 80% of the company in 2006 and $37bn that Daimler-Benz paid in 1998, although these amounts include Chrysler Financial, which Cerberus sold to TD for $6.3bn in December 2010

39

20%

5%

5%

16%

7.5%

5%

41.5%

363 Bankruptcy Sale (4/30/2009)

Performance Event 1 (1/10/2011)


UST Call Options (5/24/2011)

Remaining Call Options (7/21/2011)


Purchase From VEBA Trust (1/5/2014)

Fiat Ownership Stake

Marchionnes negotiating prowess secured Chrysler at an extremely attractive valuation

Overview of Ownership

The Agnelli family is the largest shareholder in the company, holding just under 31%

Once the firm lists on the NYSE (expected in October), there will likely be a large shift in shareholder base

40

Source: Capital IQ

Common % of Market Value

Holder Stock Held Common (EUR in mm)

Giovanni Agnelli e C. S.a.p.az. 375,972,150 30.9% 3,267.6

Baillie Gifford & Co. 61,286,212 5.0% 532.6

BlackRock, Inc. (NYSE:BLK) 38,449,885 3.2% 334.2

Norges Bank Investment Management 25,139,854 2.1% 218.5

Capital Research and Management Company 22,982,403 1.9% 199.7

Grantham, Mayo, Van Otterloo & Co. LLC 12,992,183 1.1% 112.9

Oldfield Partners LLP 11,880,608 1.0% 103.3

The Vanguard Group, Inc. 11,034,209 0.9% 95.9

Sunamerica Asset Management, LLC 11,028,138 0.9% 95.8

Bessemer Investment Management LLC 5,734,633 0.5% 49.8

Agnelli family has a history of supporting value creative initiatives at its companies

Overview of Management

Sergio Marchionne: Has been CEO of Fiat since 2004 and has led Chrysler since 2009 Oversaw the turnaround of SGS1, which is the worlds leading inspection,

verification, testing and certification company, over 13 years. The Agnelli family sold its 15 percent SGS holding in 2013 at a 14x EBITDA valuation for 2bn, netting a capital gain of 1.5bn

Unusually nonconformist style and acts as an owner of the business Focuses on creating a more collaborative culture between units to enhance

shareholder value

John Elkann: Grandson of Gianni Agnelli and current scion of the Agnelli dynasty Has served as Chairman of Fiat SpA since 2010 He is currently CEO and Chairman of Exor2 Member of the Board of Directors of News Corp and is a board member of

Fiat Industrial, The Economist Group and Banca Leonardo

41 Best in class management operating business as an owner

1Agnelli family portfolio company 2Agnelli family holding company for Fiat, Fiat Industrial shares

Current Bear Base Bull

Option Number of Shares Strike Expiry 8.65 5.30 16.50 35.75

1 10,670,000 6.583 1-Jan-16 22,054,890 - 105,814,390 311,211,890

2 5,000,000 13.370 3-Nov-14 - - 15,650,000 111,900,000

Total: 15,670,000 8.749 22,054,890 - 121,464,390 423,111,890

% Change: -100.0% 450.7% 1818.4%

CEO Incentives

Marchionne currently has options to purchase 10,670,000 shares at a strike of 6.583 per share with expiration of January 1, 2016 and other options to purchase 5,000,000 shares at a strike of 13.37 per share with expiration of November 3, 2014

42 Managements interests are well aligned with shareholders

Debt Maturity Schedule

43

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

2014 2015 2016 2017 2018 2019 2020 2021

Corporate Debt Maturity Schedule ( bn) Weighted Average Interest Rate: 6.7%

Summary Model

45

2011 2012 2013 2014 2015 2016 2017 2018 2019

FY FY FY FY FY FY FY FY FY

( million) 365 366 365 365 365 366 365 365 365

Net revenues 59,559 83,957 86,816 93,321 97,749 98,545 104,403 105,199 110,167

% Grow th 66.0% 41.0% 3.4% 7.5% 4.7% 0.8% 5.9% 0.8% 4.7%

Cost of sales 50,704 71,474 74,570 80,537 83,191 83,219 87,636 88,133 92,291

SG&A 5,047 6,731 6,689 7,094 7,430 7,491 7,936 7,997 8,374

Research and development costs 1,367 1,835 2,231 2,498 2,617 2,638 2,795 2,816 2,949

Other income/(expenses) (49) (103) 68 - - - - - -

TRADING PROFIT/(LOSS) 2,392 3,814 3,394 3,440 4,745 5,414 6,253 6,470 6,770

Result from investments:

Share of equity method the profit/(loss) 146 94 87 - - - - - -

Other income/(expenses) from investments (15) 13 10 - - - - - -

Gains/(losses) on the disposal of investments 21 (91) 8 - - - - - -

Restructuring costs (102) (15) (28) - - - - - -

Other unusual income/(expenses) 1,025 (138) (499) (300) - - - - -

Total 1,075 (137) (422) (300) - - - - -

EBIT 3,467 3,677 2,972 3,140 4,745 5,414 6,253 6,470 6,770

DD&A 3,358 4,134 4,574 4,822 5,055 5,272 5,489 5,705 5,922

EBITDA 6,825 7,811 7,546 7,962 9,800 10,686 11,741 12,175 12,692

Financial income/(expenses) (1,282) (1,641) (1,964) (1,859) (1,600) (1,351) (1,120) (987) (987)

EBT 2,185 2,036 1,008 1,281 3,145 4,063 5,133 5,483 5,783

Income taxes (534) (625) (943) (513) (1,258) (1,625) (2,053) (2,193) (2,313)

ETR 24% 31% 94% 40% 40% 40% 40% 40% 40%

PROFIT/(LOSS) FROM CONTINUING OPERATIONS 1,651 1,411 1,951 769 1,887 2,438 3,080 3,290 3,470

Posttax profit/(loss) from Discontinued Operations - - (943) - - - - - -

PROFIT/(LOSS) FOR THE PERIOD 1,651 1,411 1,008 769 1,887 2,438 3,080 3,290 3,470

PROFIT/(LOSS) FOR THE PERIOD ATTRIBUTABLE TO:

Ow ners of the parent 1,334 348 904 769 1,887 2,438 3,080 3,290 3,470

Noncontrolling interests 317 1,063 1,047 - - - - - -

(in )

BASIC EARNINGS/(LOSS) PER ORDINARY SHARE 1.10 0.29 0.74 0.63 1.55 2.01 2.53 2.71 2.85

Income Statement

46

2011 2012 2013 2014 2015 2016 2017 2018 2019


( million) 365 366 365 365 365 366 365 365 365

CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES:

Profit/(loss) for the period 1,651 1,411 1,951 769 1,887 2,438 3,080 3,290 3,470

Amortisation and depreciation 3,358 4,134 4,574 4,822 5,055 5,272 5,489 5,705 5,922

(Gains)/losses from disposal of noncurrent assets - 105 23

Other noncash items (1,106) 47 522

Dividends received 105 89 92

Change in provisions (116) 77 444

Change in deferred income taxes (19) (72) (1,578)

Change in items due to buyback commitments (62) (51) 92

Change in operating lease items (28) (10) 1

Change in w orking capital 1,412 714 1,468 122 830 150 - - -

TOTAL CASH FLOWS FROM OPERATING ACTIVITIES: 5,195 6,444 7,589 5,713 7,772 7,860 8,568 8,995 9,392

CASH FLOWS FROM/(USED IN) INVESTMENT ACTIVITIES:

Investments in:

Property, plant and equipment and intangible assets (5,528) (7,534) (7,440) (7,000) (6,500) (6,500) (6,500) (6,500) (6,500)

Investments in consolidated subsidiaries and other investments (22) - (19)

Proceeds from the sale of noncurrent assets 329 139 48

Net change in receivables from financing activities (1,218) (24) (449)

Change in other current securities (43) (64) (10)

Other changes 5,624 (30) (216)

TOTAL CASH FLOWS FROM INVESTMENT ACTIVITIES: (858) (7,513) (8,086) (7,000) (6,500) (6,500) (6,500) (6,500) (6,500)

CASH FLOWS FROM/(USED IN) FINANCING ACTIVITIES:

Issuance of bonds 2,500 2,535 2,866 1,750 (2,500) (2,500) (2,500) (2,500) -

Repayment of bonds (2,448) (1,450) (1,000)

Issuance of mediumterm borrow ings 2,149 1,925 3,188

Repayment of mediumterm borrow ings (3,895) (1,528) (2,549)

Net change in other f inancial payables and other f inancial assets/liabilities2,761 197 686

Capital increase 143 22 4

Dividends paid 41 (58) (1)

Distribution for tax w ithholding obligations on behalf of noncontrolling interests (181) (6)

Purchase of ow nership interests in subsidiaries (438)

TOTAL CASH FLOWS FROM FINANCING ACTIVITIES: 632 1,643 3,188 1,750 (2,500) (2,500) (2,500) (2,500) -

Translation exchange differences (419) (909) - - - - - -

TOTAL CHANGE IN CASH AND CASH EQUIVALENTS 4,969 155 1,782 463 (1,228) (1,140) (432) (5) 2,892

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,967 17,526 17,657 19,439 19,902 18,674 17,534 17,102 17,097

CASH AND CASH EQUIVALENTS AT END OF PERIOD 17,526 17,657 19,439 19,902 18,674 17,534 17,102 17,097 19,989

STATEMENT OF CASHFLOWS

47

2011 2012 2013 2014 2015 2016 2017 2018 2019


( million) 365 366 365 365 365 366 365 365 365

ASSETS

Inventories 9,123 9,295 10,230 10,997 11,518 11,612 12,302 12,396 12,982

Trade receivables 2,625 2,702 2,406 2,586 2,709 2,731 2,893 2,915 3,053

Receivables from financing activities 3,968 3,727 3,671 3,946 4,133 4,167 4,415 4,448 4,658

Current tax receivables 369 236 291 291 291 291 291 291 291

Other current assets 2,088 2,163 2,302 2,302 2,302 2,302 2,302 2,302 2,302

Current f inancial assets: 789 807 815 815 815 815 815 815 815

Current investments 33 32 35 35 35 35 35 35 35

Current securities 199 256 247 247 247 247 247 247 247

Other f inancial assets 557 519 533 533 533 533 533 533 533

Cash and cash equivalents 17,526 17,657 19,439 19,902 18,674 17,534 17,102 17,097 19,989

Total Current assets 36,488 36,587 39,154 40,839 40,442 39,452 40,121 40,265 44,090

Intangible assets 18,200 19,284 19,509 19,509 19,509 19,509 19,509 19,509 19,509

Property, plant and equipment 13,213 22,061 22,843 25,021 26,466 27,694 28,705 29,500 30,078

Investments and other f inancial assets: 4,987 2,287 2,260 2,260 2,260 2,260 2,260 2,260 2,260

Investments accounted for using the equity method 20,785 1,507 1,561 1,561 1,561 1,561 1,561 1,561 1,561

Other investments and f inancial assets 2,660 780 699 699 699 699 699 699 699

Leased assets 1,579 1 1 1 1 1 1 1 1

Defined benefit plan assets 1,081 93 105 105 105 105 105 105 105

Deferred tax assets 45 1,738 2,893 2,893 2,893 2,893 2,893 2,893 2,893

Total Noncurrent assets 39,105 45,464 47,611 49,789 51,234 52,462 53,473 54,268 54,846

Assets held for sale 1,690 55 9 - - - - - -

TOTAL ASSETS 77,283 82,106 86,774 90,628 91,676 91,914 93,594 94,533 98,936

EQUITY AND LIABILITIES

Equity:

Equity attributable to ow ners of the parent 8,727 6,187 8,326 12,623 15,262 17,836 20,813 24,089 27,472

Noncontrolling interest 3,533 2,182 4,258 750 750 750 750 750 750

Provisions:

Employee benefits 7,026 11,486 8,265 8,265 8,265 8,265 8,265 8,265 8,265

Other provisions 8,598 8,790 9,095 9,095 9,095 9,095 9,095 9,095 9,095

Debt:

Assetbacked financing 710 449 596 596 596 596 596 596 596

Other debt 26,062 27,440 29,306 31,056 28,556 26,056 23,556 21,056 21,056

Other f inancial liabilities 429 201 137 137 137 137 137 137 137

Trade payables 16,418 16,558 17,235 18,526 19,405 19,563 20,726 20,884 21,871

Current tax payables 230 231 314 338 354 356 378 380 398

Deferred tax liabilities 760 801 278 299 313 316 334 337 353

Other current liabilities 7,538 7,781 8,943 8,943 8,943 8,943 8,943 8,943 8,943

Liabilities held for sale - 21 - - - - - -

TOTAL EQUITY AND LIABILITIES 80,031 82,106 86,774 90,628 91,676 91,914 93,594 94,533 98,936

BALANCE SHEET

48

2011 2012 2013 2014 2015 2016 2017 2018 2019


( million) 365 366 365 365 365 366 365 365 365

Revenues:

NAFTA 33,800 43,521 45,777 49,091 52,644 51,136 54,690 53,182 56,735

LATAM 11,068 11,062 9,973 8,976 9,448 9,973 10,498 11,023 11,548

APAC 2,086 3,128 4,621 5,670 5,670 5,670 5,670 5,670 5,670

EMEA 20,078 17,800 17,420 19,573 21,352 23,132 24,911 26,691 27,580

Luxury Brands 4,000 8,512 7,134 7,134 7,134 7,134 7,134

Components and Production Systems 1,500 1,500 1,500 1,500 1,500 1,500

Other activities

Unallocated items & adjustments

Total net Revenues 67,032 75,511 81,791 93,321 97,749 98,545 104,403 105,199 110,167

EBIT:

NAFTA 1770 2,491 2,290 2,456 2,891 2,944 3,149 3,062 3,267

LATAM 1385 1,025 492 269 373 570 800 945 990

APAC 119 255 318 390 410 430 450 470 490

EMEA -897 (470) (737) (489) 120 520 910 1,050 1,085

Luxury Brands 470 762 903 903 903 903 903

Components and Production Systems 146 145 145 145 145 145 145

Other activities

Unallocated items & adjustments (93) (98) (99) (104) (105) (110)

EBIT: 2,377 3,301 2,979 3,440 4,745 5,414 6,253 6,470 6,770

EBIT Margin (%):

NAFTA 5.2% 5.7% 5.0% 5.0% 5.5% 5.8% 5.8% 5.8% 5.8%

LATAM 12.5% 9.3% 4.9% 3.0% 4.0% 5.7% 7.6% 8.6% 8.6%

APAC 5.7% 8.2% 6.9% 6.9% 7.2% 7.6% 7.9% 8.3% 8.6%

EMEA -4.5% -2.6% -4.2% -2.5% 0.6% 2.2% 3.7% 3.9% 3.9%

Luxury Brands 11.8% 15.0% 12.7% 12.7% 12.7% 12.7% 12.7%

Components and Production Systems

Other activities

Unallocated items & adjustments (as % of revenue) 0.0% 0.0% 0.0% -0.1% -0.1% -0.1% -0.1% -0.1% -0.1%

EBIT Margin (%): 3.5% 4.4% 3.6% 3.7% 4.9% 5.5% 6.0% 6.2% 6.1%

Segment Economics

49

2011 2012 2013 2014 2015 2016 2017 2018 2019


( million) 365 366 365 365 365 366 365 365 365

Vehicle Shipments (000s)

NAFTA 1783 2,115 2,238 2,400 2,574 2,500 2,674 2,600 2,774

LATAM 929 979 950 855 900 950 1,000 1,050 1,100

APAC 74 103 163 200 200 200 200 200 200

EMEA 1180 1,012 979 1,100 1,200 1,300 1,400 1,500 1,550

Luxury Brands - 22 48 57 57 57 57 57

Vehicle Shipments (000s) 3,966 4,209 4,352 4,603 4,931 5,007 5,331 5,407 5,681

Revenues per vehicle:

NAFTA 20,577 20,454 20,454 20,454 20,454 20,454 20,454 20,454

LATAM 11,299 10,498 10,498 10,498 10,498 10,498 10,498 10,498

APAC 30,369 28,350 28,350 28,350 28,350 28,350 28,350 28,350

EMEA 17,589 17,794 17,794 17,794 17,794 17,794 17,794 17,794

Luxury Brands 179,195 179,195 125,163 125,163 125,163 125,163 125,163

Total net Revenues 17,940 18,792 20,276 19,824 19,681 19,585 19,456 19,393

EBIT per vehicle:

NAFTA 993 1,178 1,023 1,023 1,123 1,178 1,178 1,178 1,178

LATAM 1,491 1,047 518 315 415 600 800 900 900

APAC 1,608 2,476 1,951 1,951 2,051 2,151 2,251 2,351 2,451

EMEA (760) (464) (753) (445) 100 400 650 700 700

Luxury Brands 21,055 16,050 15,840 15,840 15,840 15,840 15,840

EBIT: 599 784 684 747 962 1,081 1,173 1,197 1,192

Vehicle Economics

michael guichon sohn conference presentation - fiat chrysler automobiles

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